North’s economy to grow despite row over austerity

The North’s economy will grow this year and over the next few years at a respectable rate, despite the row over austerity between Stormont and Westminster, according to a new forecast.

The EY Ernst & Young all-Ireland economic outlook forecasts the northern economy expanded 1.7% last year and will grow by 2% this year, and increase by an average annual rate of 2% through 2020. Like in the Republic, the North’s economy is being helped by exports into Britain where recovery is picking up steam.

EY, however, lists a number of downside risks that could threaten the region’s economic prospects.

These include the unresolved clash between the main Stormont parties over spending, the potential for Westminster to impose “even greater than anticipated austerity” and “a dangerous cocktail of public spending pressures, weak wage growth and sterling strength” that could harm Northern producers selling into the Republic and the rest of the eurozone.

On the upside, the North would benefit if it were to secure even more powers from Westminster over its fiscal affairs such as corporation tax, following the huge election victory of the Scottish Nationalists.

“In NI, with public sector austerity on the horizon, public administration and education are the only sectors expected to act as a drag on economic growth over the next five years,” it says.

EY uses gross added value to measure the Northern economy. For the Republic, it projects gross domestic product expanded 4.8% last year, and will grow 3.7% this year. The southern economy will then grow by an average of 3% for each of the next few years, as exports continue to boom and domestic spending recovers.